Top 30 Things Start-ups & Small Businesses Need to Know: #3 – Nexus

Once you identify all the states you must register to do business in, you must determine if you are subject to sales tax nexus in those states, or if you need to file income tax returns in those states. Nexus rules have changed dramatically in recent years as states have become desperate for funds and more businesses have moved to e-commerce. In June of 2018, the Supreme Court decided South Dakota vs. Wayfair, which signals a significant change in how businesses need to approach the issue.

While this case means that Nexus as it pertains to sales tax will no longer be tied to physical presence or other such factors, but rather the location of the client ordering a product or service, there are still variations from state to state in the factors that determine whether a business need to file an income tax return in each state. These rules are changing every day, so businesses and their accountants need to be constantly researching and evaluating what requirements exist for each and every state touched by the business.